Linking forests to markets: chain of custody certification under the Forest Stewardship Council

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___________________________________________________ ________________________

Linking forests to markets: chain of custody certification under the Forest

Stewardship Council

By Sae Makino

Submitted to the Graduate Faculty of North Carolina State University

in partial fulfillment of the requirements for the Degree of

Master of Natural Resources International Resources Technical Option

Raleigh, North Carolina

2004

Approved by advisory committee: Erin Sills, Chair

Abstract

Acknowledgements

While pursuing my master’s degree at the Department of Forestry,

North Carolina State University, I encountered various challenges because the

educational system, academic requirements, and the language are different from what I was used to in Japan. Most of the time, I enjoyed confronting those challenges and achieving success, thanks to a lot of support that I was very lucky to have from many people. Without help from those people, I would not have been able to achieve this success and I would like to take this opportunity to thank some of them.

I would like to show great gratitude to Michael Siller for his continuous encouragement, patience, and sacrifices to assist my academic program. His support and collaboration always kept me moving forward and gave me a sense of being accompanied all the time. This accomplishment is as much his as it is mine.

I am also very grateful for the immense assistance from the members of my graduate committee. I was very fortunate to be supported by Dr. Erin Sills, my advisor and chair committee member. I am very thankful not only for her direction during the project, but also for her infinite encouragement, counsel, and the generous opportunity she gave in pursuing my project. I also owe a great deal to Dr. Fred Cubbage and Dr. Susan Moore for their expertise and ability to direct my project. Their professional assistance

strengthened me in my pursuit of completing my project.

Contents

CHAPTER I

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1.1 Introduction ...1

1.2 CoC Certification Systems ...4

1.2.1 Forest certification ...4

1.2.2 The CoC mechanism...5

1.3 Forest certification schemes...8

1.3.1 FSC...9

1.3.2 PEFC...12

1.3.3 CSA ...14

1.3.4 MTCC...16

1.4 Overall view of this study ...20

CHAPTER II

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2.1 Introduction ...21

2.2 Research questions ...24

2.3 Objectives...24

2.4 Methods...24

2.5 Results ...27

2.5.1 Trends in number of companies...27

2.5.2 Trends in diversity across the industry sectors ...29

2.5.3 Industry Sectors Distribution ...31

2.6 Discussion ...34

CHAPTER III

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3.1 Introduction ...37

3.2 Research Questions ...40

3.3 Objectives...40

3.4 Methods...41

3.5 Results ...42

3.5.1 Data Availability ...42

3.5.2 Type of Companies ...44

3.5.3 Employees and Estimated Sales...45

CHAPTER IV ... 56

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USA

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4.1 Introduction ...56

4.2 Research Questions ...58

4.3 Objectives...58

4.4 Methodology...59

4.4.1 Sampling design ...59

4.4.2 Questionnaire development ...59

4.4.3 Method ...60

4.5 Results ...61

4.5.1 Response rate...61

4.5.2 Non-response bias ...62

4.5.3 Certification status...66

4.5.4 CFPs and marketplaces ...68

4.5.5 Decision making processes...72

4.5.6 Expectations ...81

4.5.7 Perceived benefits...89

4.6 Discussion ...94

4.6.1 Certification Status ...94

4.6.2 CFPs...96

4.6.3 Decision Making Processes ...98

4.6.4 Expectations and Perceived Benefits ...101

REFERENCES ... 105

Chapter I

Introduction to Chain-of-Custody Certification

1.1 Introduction

Forest certification Chain-of-Custody (CoC) is a bottleneck in today’s

Certified Forest Product (CFP) markets, resulting in the large majority of

products produced from certified forests being sold without reference to forest

certification (UN 2002; Rametsteiner 2003). This weakness of the forest

certification system prevents both producers and consumers from receiving

the benefits of forest certification, in which consumers are given the choice to

purchase environmentally sound products, and producers are able to acquire

marketing advantages. As a result of this underemphasis on the certification

system among manufacturers and distributors, development of the market

for CFPs has been generally been limited to niche products and challenges for

the further success of forest certification have not been met.

The impediments to the implementation of CoC certification among

the forest industry sectors are mainly a result of the following characteristics

of forest products (Groves 1996; Vogt 2000):

requires a large land area. Consequently, a diversity of ownership is

typically involved, posing an obstacle to obtaining large volumes of raw

wood material from any one forest. In other words, producers have to

obtain their wood-supply from diverse forests;

Worldwide supply chain: forest products are one of the most widely

traded products in the world, making the CoC of forest products

complicated to establish and difficult to track;

Production economics: CFPs require an additional handling system,

separating them from non-CFPs or using an inventory method, which

requires modification from existing operating systems, additional costs,

and extra operational processes; and

Product nature: highly processed forest products are manufactured

through very complex processing chains, involving many producers

and traders. Additionally, many forest products are comprised of

multiple species of wood and/or multiple components.

These characteristics of forest products make the promotion of CoC

certification among forest industry manufacturers and distributors more

challenging unless there are enough incentives and benefits flowing from

forest certification. Potential benefits from forest certification can include:

Price premiums: buyers’ willingness to pay for environmentally

Market access: CFPs may provide opportunities to enter new markets

or to maintain current market share; and

Company image: certification may improve companies’ images and

improve their credibility in the eyes of the public.

(Rickenbach 2000)

These benefits will be generated only if a majority of consumers

recognize and appreciate the benefits of forest certification, resulting in a

large and continuously increasing demand for CFPs. Currently, however, the

market for CFPs is very limited in terms of both overall volume and

geographic scope. Although business-to-business markets have shown

increasing interest in CFPs – thanks in large part to environmental NGOs

that create a demand for CFPs by creating buyers’ groups – demand for CFPs

by private end-users is still insignificant (Rametsteiner 1999; Smouts 2002).

While this lack of end-user awareness and interest is one of the fundamental

obstacles to the growth of the market for CFPs worldwide, there is a

movement by certain major forest products retailers to create consumer

demand for CFPs. This retailer-driven demand can be seen most clearly in

Europe and North America (Rametsteiner 2003).

Forest certification, originally initiated in the early 1990’s as a

deforestation, is now becoming an important instrument for communication

on sustainable forest management throughout the forest and trade related

sectors. In short, the role of the supply-side in increasing demand for CFPs

and overcoming environmental shortcomings of forest products CoC is

becoming essential, and will be a critical factor to the success of forest

certification in the future.

1.2 CoC Certification Systems

1.2.1 Forest certification

Forest management certification can be performed in three different

forms, depending on the relationship between the auditor and the party being

audited. First-party certification is an internal assessment by an

organization of its own systems and practices. Second-party certification is

an assessment conducted by an affiliated group, such as customers or an

outside trade association. Lastly, third-party certification is an assessment by

a neutral third-party based on a set of accepted principles and standards.

Another important consideration for the forest certification system is the

difference between systems-based certification and performance-based

management systems designed to recognize the company’s impact on the

environment, to monitor that impact, and improve performance.

Performance-based certification requires the audited party and the land on

which timber is grown to meet a specific set of previously adopted

performance requirements (Hansen 1998; Vogt 2000).

Most comprehensive forest certification programs consist of two

components: the first is forest management certification, an evaluation of

forest operation systems based on previously-established criteria and

standards. The other is CoC certification, a system to track the origin of raw

materials. While forest management certification aims to achieve

sustainable forest management, the main objective of CoC certification is to

verify for consumers that the products are coming from certified forests.

Therefore, CoC certification provides the definitive link between the producer

and the consumer, making the forest certification system more

comprehensive and effective.

1.2.2 The CoC mechanism

CoC is the process of tracing materials through the supply chain in

order to know where the material in a particular product came from (Dykstra

the final consumer. Consequently, CoC can contain a series of “processing

stages” or production phases and “between processing stages” or

transportation phases. Although the supply chain for forest products can

often be very long and complex, e.g., from trees in a forest to a cabinet in a

kitchen, each stage can be addressed separately in order to achieve a

comprehensive CoC information system.

There are three ways for firms to approach CoC certification,

depending on the type of products and operation being certified: the physical

separation system, the percentage based system, and the input/output model.

The physical separation system requires each batch of CFPs to be physically

separated from non-CFPs at every stage in the chain. The percentage based

system uses inventory control and the accounting of wood flow to maintain a

minimum percentage of certified material by volume or weight. The

input/output model is based on the premise that when a known percentage of

certified raw material enters into processing, an equal percentage of the

finish product will be CFPs as well (ITTO 2002; Anderson 2004).

All CoCs consist of the same fundamental elements: 1) information on

quantities; 2) management of critical control points; and 3) personnel

training. However, implementation technologies may vary in practice

(Dykstra 2002). These elements can be described as follows:

1) Information on quantities: the collection and recording of information

on the quantity (volume, weight, piece, or value) of material

distributed or manufactured is a very important aspect of CoC. In the

processing stages, data on the quantity of raw material purchased

and the quantity of product sold is maintained. In the between

processing stages, data on the quantity sold by the preceding

processor and the quantity purchased by the subsequent processor in

the chain is required.

2) Critical control points: critical control points are points in the

processing chain where unauthorized materials can potentially

become part of a CFP, resulting in the diminished credibility of CoC

among consumers. To minimize the risk of critical control points, the

development of three systems is required: product identification,

segmentation, and documentation and records. Identification is

accomplished by applying one of many labeling technologies, such as

paint and chisel labels, radio-frequently identification, barcode

information, etc.; segmentation is accomplished by handling and

processing CFPs separately from non-CFPs; and documentation and

records are maintained by keeping records of all inputs, processing

and outputs of certified products.

personnel who implement the CoC at each stage of the chain is a

critical factor for the success of the CoC system, in order to prevent

accidentally breaking the CoC, and intentional fraud in the CoC.

1.3 Forest certification schemes

Increasing worldwide interest in forest certification has inspired a

proliferation of certification schemes. Over 50 certification programs are

currently active worldwide (IUCN 2003). However, the world’s share of

certified forests are dominated by a few major certification schemes: the

Programme for the Endorsement of Forest Certification Schemes – formerly

known as Pan-European Forest Certification (covering 38% of all certified

forests), the Forest Stewardship Council (23%), the Sustainable Forest

Initiative (17%), the American Tree Farm System (10%), the Canadian

Standards Association (8%), and others (4%) (Atyi 2002). Although most

certification programs are global schemes or national initiatives in developed

countries, several tropical timber-producing countries have been actively

developing their own national certification schemes. The most advanced of

these programs include the Malaysian Timber Certification Council, The

Lembaga Ekolabeling Institute (Indonesian Eco-label Institute), and

Programa de Certificação de Florestas (The Brazilian Forest Certification

(FSC), the Pan-European Forest Certification (PEFC), the Canadian

Standards Association (CSA), and the Malaysian Timber Certification

Council (MTCC) have CoC certification and require it in order for a product

to be labeled. However, CoC requirements and implementation mechanisms

are different among these forest certification schemes (Brack 2002).

Although the Sustainable Forest Initiative (SFI) developed an ecolabel in

2002, its approach to CoC is different from the other forest certification

schemes. Whereas the other schemes require a formal and physical process

in order to issue a CoC certificate, SFI addresses CoC certification through

third-party audits of a firm’s procurement system, in which a verifiable

monitoring system evaluates the results of reforestation promotion and use of

Best Management Practices within wood supply systems. However, there is

no control requirement for the CoC mechanism in order to use the SFI logo on

products (Anderson 2004).

1.3.1 FSC

FSC is an independent, not-for-profit, non-governmental organization

founded in 1993 to support environmentally appropriate, socially beneficial,

and economically viable management of the world's forests. Three types of

certification are available from the FSC: forest management certificates, CoC

certificates, and joint forest management chain-of-custody certificates.

management standards based on ten Principles and Criteria for responsible

forest management, and CoC standards for manufacturers and processors of

forest products. FSC has newly developed a CoC Standard for Companies

Supplying and Manufacturing FSC-certified Products, combining previous

standards for chip and fiber products, sawed wood products, and assembled

products. The new standard employs a physical separation system and also

introduced a minimum percentage system. This Standard will be effective by

the end of 2004. The standard requires the following aspects (FSC 2004):

1) Companies shall designate a responsible person;

2) Scope of CoC system – companies shall: maintain an FSC product

group line of all product groups in the company’s FSC CoC control

system; categorize each product group as FSC-pure, FSC-mixed, or

FSC-recycled; and have a CoC control system that is sufficient to

ensure that all products meet CoC requirements;

3) Companies shall have written procedures and/or work instruction to

ensure implementation;

4) Companies shall maintain records and reports of products for at

least five years;

5) Companies shall specify the training requirements and provide

training to all staff;

6) Input specification – companies shall: specify all input material as

reclaimed wood, or controlled wood; require written specification

from the wood suppliers and for the purchase of all certified and

post-consumer reclaimed material; and control all non-certified

material and other reclaimed wood;

7) Companies generating reclaimed material on-site shall allocate the

wood/fiber to FSC pure, FSC-mixed, post-consumer reclaimed,

controlled, or uncontrolled wood/fiber

8) Companies collecting or trading in post-consumer reclaimed material

shall meet all applicable requirements;

9) Companies shall check all wood/fiber to be identifiable on arrival and

store FSC-pure wood/fiber separately or identifiably if companies

wish to retain its status as FSC-pure;

10) Production control and records – companies shall record the inputs

of certified material on a monthly basis and identify a number for all

product groups;

11) Companies shall comply within the FSC Trademark Policy Manual

to be eligible for on-product FSC trademark use;

12) Minimum requirements for FSC-labeling – companies shall comply

with minimum requirements for labeling: the FSC-pure label

requires 100% certified material; the FSC-mixed label requires, in

addition to 10% annual average FSC credit accounting, that 70% of

with the post-consumer reclaimed wood/fiber and certified material;

and the FSC-recycled label requires that at least 70% of the total

wood/fiber be post-consumer reclaimed wood;

13) Companies shall calculate the percentage according to FSC

calculation requirements and have written procedures and/or work

instructions;

14) FSC credit account – companies shall: identify the inputs and the

conversion factor for each component; record the FSC credit entered

for each component; calculate monthly the FSC credit based on the

information; and deduct the FSC credit for the amount of products

sold and/or any expired credit after 12 months;

15) Companies shall receive approval of on-product label from its

FSC-accredited certification body and may make claims such as

“well-managed” or “responsibly “well-managed” but may not refer to “the

sustainability” of the production process;

16) Companies shall issue sales invoices including required information;

and

17) Transport documentation shall be issued if the certified products are

transported separately from the sales invoice.

1.3.2 PEFC

appropriate, socially beneficial and economically viable management of

forests for present and future generations. PEFC provides forest

management certification and CoC certification schemes, which are carried

out by an independent accredited certification body. PEFC has been revising

the International CoC Standard, which will become effective at the end of

2004. The standard specifies requirements for CoC certification as follows

(PEFC 2004):

1) Minimum management system requirements – companies shall:

define and document their commitment to CoC certification; identify

responsible personnel and establish their responsibilities and

authority; plan procurement of certified raw materials; document all

procedures; establish records on certified products and maintain

them for a minimum period of five years; train and educate all staff;

provide the technical facilities for effective CoC implementation; and

perform inspection to ensure implementation;

2) Requirements for the CoC process (physical separation method) –

companies shall: identify the origin of certified raw material with

associated documents; require certificate documentation from all

suppliers of wood; ensure the certified raw material is separated or

clearly identifiable during the whole process; and provide the

customer with certificate documentation at the point of sale;

companies shall: identify the production batch; identify the origin of

certified raw material with associated documents; require certificate

documentation from all suppliers of wood; calculate the certified

percentage based on either the average percentage method or volume

credit method; and provide the customer with certificate

documentation at the point of sale.

1.3.3 CSA

The CSA forest certification scheme is a program of CSA international,

an independent, not-for-profit organization. In 1996, the CSA established

Canada's National Standard for Sustainable Forest Management for their

forest certification. Once a program participant has been certified under

forest management certification, it can also choose to become a CoC

certificate-holder through the CSA Forest Products Marking Program. The

CSA has developed CSA PLUS 1163, which outlines the minimum

requirements for CoC. To be certified under CSA CoC certification, an

organization first has to implement the CoC requirements outlined in CSA

PLUS 1163. Secondly, an independent third party audits the organization’s

CoC, and then it can become licensed to apply the CSA SFM Mark to certified

forest products (CSA). Requirements for CSA CoC are described in CSA

PLUS 1163 as follows (CSA 2001):

2) Document control system – organizations shall identify the

responsible personnel and specify activities, process controls,

information and management systems, and requirements for

controlling these;

3) Organizations shall have a system for verifying the origin of certified

material;

4) The origin of certified material shall be verifiable during transporting,

handing and processing;

5) Optional approaches – three approaches exist to implementing a

CoC: (a) an input/output system for solid wood; (b) a minimum

average percentage system for composite products; and (c) physical

separation; inventory control and accounting of wood flows are

required for the input/output and minimum average percentage

systems; physical separation can be substituted with marking of

certified material;

6) Organizations shall conduct final inspection of certified products at

the end of CoC;

7) Organizations shall establish and maintain procedures for CoC to

keep records for a minimum of five years;

8) A program of periodic internal checking shall be established and

implemented;

10) Self-declared product claims shall be accurate and verifiable; and

11) Organizations shall keep a record of all complaints and take

appropriate action, which shall be documented.

1.3.4 MTCC

The MTCC is an independent not-for-profit organization established in

1998 to provide assurance to buyers of Malaysian timber products that the

products have been obtained from sustainably managed forests. The

Malaysian Criteria, Indicators, Activities and Standards of Performance,

published in 1999, were developed for forest management certification based

on the 1998 ITTO Criteria and Indicators for Sustainable Management of

Natural Tropical Forests. MTCC began operation in 2001, providing forest

management certification and CoC certification (MTCC). The requirements

for CoC certification specified in Requirements and Assessment Procedures

for CoC Certification are as follows (MTCC 2000):

1) Companies shall appoint a management representative;

2) Companies shall provide training to all staff and create a written

instructions to guide staff on CoC;

3) Companies shall verify the suppliers’ certification documents;

4) Companies shall establish and maintain written procedures and work

instructions for identifying product flows;

identification

6) For the minimum average percentage system, companies shall: conduct

an inventory control and accounting of wood flows; calculate the

percentage of certified material according to the required method;

define the batch period (less than 60 days); and adhere to minimum

percentages for certified material at 70% for solid wood products, 70%

for assembled products made of solid wood parts, 30% for chip and

fiber products, and the representative thresholds for the components

for assembled products made of both solid and chip and fiber parts;

7) Certified products shall be labeled in accordance with the requirements

in MTCC Logo Guide for Certificate Holders;

8) Companies shall provide all related documents at sales; and

9) Companies shall establish and maintain all records for a minimum

period of five years, including purchase, stock, production, and sales

T able I-1 Compariso n a m ong Sta n dards acr os s CoC ce rt if ic at io n Sch emes Fe ature FSC PEFC Syste m Third-pa rty Perfor m ance -base d Thi rd-par ty Pe rfo rman ce-b ased #

of CoC holders

35 29 (2004 , Mar ch) 1419 (2 004 , M ar ch) CoC comm enc e year 19 93 2000 Ge og ra ph ica l co ve ra ge In te rn at io na l Internatio n al (co n ce ntra ted in Eur ope ) Participants Any co m panie s, or ga ni za ti ons , e tc Any compa nie s, organi zati ons, et c P rod uc t Categories FSC-pure ( 100% ce rtifi ed m ateria l) FSC-m ixed (minimu m 70% ce rti fie d o r 70 % ce rt if ie

d and re

cy cled) FSC-re cy cl ed (mini m u m 70 % recycle d) W oo d ba se d produ cts (100 % certi fie d wo od) W oo

d based products

(m in im u m 7 0%) W oo d So u rc e V eri fi ca ti on Ce rtified wo od/fi ber Post-co n su mer re cl ai med wo od Co ntrol led wo od Othe rs (unc ontrol le d wo od) Certi fie d mate rial Non-ce rt if ie d m ate rial N on-certi fie d m ate rial Co ntrol led woo d (ve rifi ed o rigi n ) can be integ rated into ce rtifi ed m aterial Uncontrol le d wo od (n ot ide n tifi ab le ) be se parate d fr om cer tifie d wo od Phy si cal Separati on For FSC-pu re Physical se pa ra tion me thod Fo r wo od b ased pro du cts (100 %) Physi ca l s eparatio n metho d Pe rce n tag e Sy ste m FSC-mix ed and FSC-r ecycle d Mi nimum a ve ra ge pe rce n tage met h od W oo

d based products

(7 0%) Mini m u m a verage percentag e m ethod In pu t/ ou tp ut Mod els FSC-pure , FSC -m ixe d, F S C -recycl ed Cre dit acco unting metho d W oo

d based products

(1 00% and 70 % ) Credi t a cco unting m ethod Planning P roc ur em en t p la nnin g fo r cert if ie d s u pp ly materi al Hu m an resources T raining T raining Docu m ented P ro cedure yes yes Rec ords ye s, m inimum 5 years yes, mini mum 5 ye ars On /o ff -prod uct log o ye s/ ye s (approva

l from a

T able I-1 Compariso n a m ong Sta n dards acr os s CoC ce rt if ic at io n Sch emes Fe ature CSA MT CC Syste m Third-pa rty Sy ste m -b as ed Third-par ty Pe rfor man ce -ba se d #

of CoC holders

43 41 CoC comm enc e year 20 01 2000 og ra ph ica l co ve ra ge Ca nada and USA Ma la ys ia Participants C S A fo re st manage m ent ce rt if ic at e holders A n y c om panies, organizations, etc P rod uc t Categories At leas

t 70% of

th e inp u t i s ce rt if ied m aterial ( so li d woo d) At le as t 70

% of t

h

e

co

n

te

nt is c

er ti fie d m aterial (co m po site pro duc ts) 10 0% certi fi ed m ate rial So li d wo od (1 00% ce rt if ie d) C ol le cti

on of sol

id woo d (minimu m 70%) A ss em bl ed produc ts of sol id woo d parts (mini m u m 70 %) C h ip and fib er (m in imum 30 %) A ss em bl ed produc

ts of bo

th so lid an d chip/fi ber parts (70 % for so li d, 30 % fo r chip/fi ber parts) d So u rc e V eri fi ca ti on Ce rtified/ N on-c ertified materi al C erti fie d/ N on-certifie d mate ri al on-certi fie d m ate rial Phy si cal Separati on 10 0% certi fi ed Physical se pa ra tion me thod So li d wo od (1 00% ce rt if ie d) Phy si ca l s eparati on me tho d Pe rce n tag e Sy ste m At least 7 0% of the content (c om po si te

products) Mi

nimum a ve ra ge pe rce n tage syst em Other s (e xcept 10 0% ce rti fie d so lid wo od) Mi ni m u m aver ag e p er cent age s ystem pu t/ ou tp ut Mod els At least 70 % of

the input (sol

1.4 Overall view of this study

The overall objectives of this study are to: 1) assess current CoC

certificate companies from various viewpoints, including industry sectors,

geographical locations, company profile, and company perspectives on forest

certification; 2) discuss trends in the market for CFPs; and 3) discuss ways to

promote CoC certification effectively across countries.

To achieve the above objectives, three different bodies of research were

conducted to analyze current FSC CoC certificate holders. First, as discussed

in Chapter II, forest industry sectors were examined in five countries – Brazil,

Japan, South Africa, the United Kingdom and the United States – with the

aim of developing an understanding of trends in demand for CFPs across

industry sectors and countries. Second, in Chapter III, data gathered on

companies in Japan, the UK and the USA, was assessed for the purpose of

capturing profiles of current CoC certificate holders. Finally, in Chapter IV,

the perspectives of CoC certificate holders in the USA and Japan were

assessed by analyzing the results of surveys conducted of companies in these

Chapter II

Trends in Products of Chain-of-Custody Certification Holders

2.1 Introduction

One of the challenges facing forest certification is market uncertainty

for certified forest products (CFPs). If demand for CFPs is very small, the

forest industry will have insignificant economic incentive to participate in

forest certification regimes. On the other hand, if demand for CFPs

continuously increases, forest certification will provide foresters and

forestry-related industries with important benefits, such as new market accessibility,

increased sales, enhancement of competitive ability, and so on. However, as

CFPs are not currently recognized in customs classification codes for the

international trade, no official statistical data exist to analyze trends and to

estimate potential development of the market for CFPs.

Although in 2003 the potential annual timber supply from the world’s

certified forests was estimated at approximately 300 million m3, only a small

fraction of the estimated potential wood supply from certified forests is

market (Rametsteiner 2003). This is largely because most certification

schemes have not yet begun issuing CoC certification. Therefore, much of the

forest products produced from forests certified according to certification

programs that have not developed CoC certification systems technically are

unable to move downstream as CFPs. Consequently, the amount of CFPs

sold to end users will not be augmented absent progress in the CoC

certification system.

Since there are no official figures on CFPs, the number of CoC holders

across industry sectors and countries can be used as an indicator of trends in

the demand for CFPs in business-to-business markets. As of March 2004,

nearly 4,500 CoC certifications had been issued worldwide. FSC and PEFC

are the dominant players, having issued roughly 70% and 30% of CoC

certifications, respectively. The number of participants in both certification

schemes has been rapidly growing — the number of FSC CoC holders nearly

tripled from 2000 to 2003, and those holding PEFC CoC tripled from 2001 to

2003 (FSC; PEFC). Companies hold FSC CoC certificates cover a

comparatively wide range of wood-based industries and trade sectors, while

companies holding PEFC CoC certificates are mainly active in more

upstream sectors in the processing chain, such as sawmilling and timber

trade (FSC; PEFC; Rametsteiner 2003). Other major differences between

system has been active since 1993 whereas PEFC only began to issue licenses

for trademark use in 2001; and, FSC certifies companies in more than 60

countries worldwide, whereas PEFC’s CoC certifications have been issued to

companies located in just 15 countries, primarily in Europe.

As of December 2003, the geographical distribution of the FSC CoC

certificate holders, comparing developed and developing countries, was

approximately 70% and 30%, respectively. The United States has the largest

number of FSC CoC certificates in the world, with more than 400 companies.

The United Kingdom has the world’s second largest – and Europe’s largest –

number of CoC holders, with nearly 300 companies. Among Latin American

countries, Brazil possesses the largest number of CoC certified companies,

about 150, sixth in the world, overall. Japan has the largest number of

companies with CoC certificates in Asia, ranking seventh in the world. South

Africa has the

greatest number

among the African

countries, and

ranks eighth

worldwide (Graph

II-1). 0

50 100 150 200 250 300 350 400 450

USA UK

Germ any

Poland

Netherl

ands _Braz

il Japan

Switzerl

and

Sout

h Africa Sweden

Numb

er of

CoC Cert

ificat

2.2 Research questions

The research question for this study is “do trends in demand for CFPs

by countries and/or industry sectors differ?”

2.3 Objectives

The objectives of this research are: 1) to analyze the development of

CFP markets across different industry sectors in the United States, the

United Kingdom, Japan, Brazil, and South Africa; 2) to compare the trends in

demand for CFPs among these five countries; and 3) to discuss reasons for

different trends of the market for CFPs among these five countries.

2.4 Methods

As there are no official figures for trade of CFPs, this research focused

on FSC CoC certification rather than PEFC because: 1) FSC CoC certification

is more well-established, PEFC CoC certification having only been around for

a few years, which does not yet allow for sufficient data to analyze the

relevant market trends, and 2) FSC is available to any company in any

country, regardless of the region, if the company is interested in obtaining

CoC certification. This generates less bias when comparing trends across

The five countries selected – the UK, the USA, Japan, Brazil, and

South Africa, represent the leading holders of CoC certificates in their

respective regions –, North America, Europe, Asia, South America, and Africa.

From the FSC database (FSC 2003), two types of data for all CoC holders in

the five countries were collected: (1) the date that each company was certified

and (2) products that each company offers. From the data, trends in the

number of issued CoC certificates from 1993 to 2003 were first determined for

each country. Secondly, diverse products were categorized into 23 groups

based on observed tendency of goods produced by a company, products’

economic value, phases in the processing chain, and 4-digit standard

industrial classification codes (Appendix 1). These product categories are:

• round wood

• lumber

• plywood / veneer

• MDF / board

• sawmill by-products

• molding

• millwork

• distribution / transportation

• public construction materials

• housing materials

• windows / doors

• flooring

• furniture

• garden products

• household products

• pulp and paper

• wood chips

• firewood / charcoal

• pallets / boxes

• others with low value

• non-timber forest product

• non-identified

(other products were divided into higher and lower unit price)

Trends in the number and types of companies for each country were

analyzed and an index devised to indicate diversity of industry sectors by

altering Simpson’s Index of diversity indices. The diversity index (di) used in

this analysis was:

(

)

  

− =

∑

t

i S

C TS di

where: di = Diversity Index

Ci = the proportion of sector i in the country (that is, the number of

companies of sector i ÷ the total number of companies in the

country)

St = the expected proportion of a sector in the country when

companies are evenly distributed across the sectors (that is, the

expected number of companies when evenly distributed÷ the total

number of companies in the country)

2.5 Results

2.5.1 Trends in number of companies

As of December 2003, 419 companies held the FSC CoC certification in

the USA, with companies certified as early as 1993. The earliest CoC

certifications issued in both the UK and South Africa were in 1997. Presently,

the number of CoC holders is 298 in the UK and 114 in South Africa. In 1998,

the first CoC certificate was issued in Brazil and today there are 146

Brazilian CoC certified companies. Lastly, although there currently are 121

CoC holders in Japan, CoC certification is relatively new for the country,

having been in place only since 2000 (Table II-1).

Table II-1. Cumulative Number of Issued CoC Certificates

Sources: FSC 2003

Issue Year UK USA Japan Brazil South Africa

1993 2

1994 3

1995 4

1996 9

1997 4 13 1

1998 21 34 6 13

1999 75 66 20 33

2000 173 132 5 41 46

2001 226 226 18 78 74

2002 268 323 53 123 91

Although the total number of CoC holders is continuously increasing

across the five countries every year, the growth rate – the number of issued

CoC certificates in each year – differs from country to country, and from year

to year. The number of issued CoC certificates in the UK had multiplied

every year from 1997 to 2000, but after peaking in 2000, the rate of increase

has slowed down. From 1993 to 1997, the number of CoC holders in USA was

rather small and the development of CoC certification was fairly insignificant.

It is also worth noting that during this period the USA was the only country

with CoC certificates among the five. From 1997 to 2001, however, the USA

experienced sharp growth in the number of CoC certificates issued, a

phenomenon similar to that experienced in the UK prior to 2000. Unlike the

UK, however, the rate of increase in the number of certificates issued

annually has remained stable in the USA after peaking in 2001. Japan, the

latest of the five countries to enter the FSC CoC certification arena, has seen

a rapid expansion of the number of certified companies, resembling growth

rates experienced in the UK and the USA during their periods of major

growth. The rate of issuance of Brazilian and South African CoC certificates

has always been slower and unstable compared to the rates experienced in

2.5.2 Trends in diversity across the industry sectors

For all countries, generally as the number of total CoC certified

companies increases, the diversity across industry sectors is accordingly

enhanced. The UK has the most evenly distributed industry sectors among

the five countries. Compared to the diversity indices of the UK and the USA,

those of Japan, Brazil and South America have always been lower, primarily

because the number of industry sectors with CoC holders in these countries is

smaller than the number in the UK and USA. In addition, in the case of

Japan, the paper and pulp industry has been rapidly dominating the overall 0

20 40 60 80 100 120

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year

Number of Issued

Certificates

UK USA Japan Brazil South Africa

CoC industry in the country—from 5% of the total in 2001, to 35% in 2002,

and approximately 45% in 2003. This is a phenomenon distinct to Japan

with no analog in the other countries and has resulted in lower diversity and

uneven distribution of certification holders across the Japanese forest

industry sectors. This explained the lower diversity indices in Japan

compared to those of Brazil and South Africa even though their numbers of

CoC certificate holders are in a similar range (Graph II-3).

0 50 100 150 200 250 300 350 400 450

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Year

Number of CoC Certificates

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Diversity Index

Fig. II-3. Cumulative Number of CoC Certificates and Diversity Index across Industry Sectors

Index

UK USA Japan Brazil South Africa

Diversity

UK USA Japan Brazil South Africa # of CoC Certificates

2.5.3 Industry Sectors Distribution

As seen in Graph II-4, distribution of CoC certified companies across

industry sectors industries differ from country to country. Primary wood

products, including round wood, lumber, sawmill, and sawmill by-products,

account for over 40% of the wood-related industry in Brazil and South Africa,

approximately 30% in the UK and the USA, and about 15% in Japan.

Companies producing value added forest products, such as MDF, plywood,

veneer, and particleboards, make up approximately 10% to 20% of all

industry in the UK, the USA and Brazil, and less than 10% in South Africa.

Interestingly, this category is almost insignificant in Japan.

The manufacturers of construction materials, including housing

materials and molding, account for around 10% in the UK, the USA, and

Japan, and around 5% in Brazil and South Africa. About 30% of the British,

American and Brazilian companies are manufacturers of secondary wood

products, such as doors, flooring, furniture, garden products, and household

items, while this group accounts for 25% of companies in South Africa and

15% in Japan. Japan is unique insofar as about 45% of its forest companies

are in the pulp and paper industry. In contrast, less than 5% of CoC

companies in the other four countries surveyed are in the pulp and paper

highest concentration of companies producing firewood and/or charcoal,

nearly 10%.

Overall, when products were categorized according to their processing

phases in the chain-of-custody, the UK and the USA have the most similar

distribution patterns by industry groups among the five countries. The

distribution patterns of Brazilian companies are close to those of the UK and

the USA, except Brazil shows a comparatively higher concentration in the

primary forest products sector. In South Africa, the proportion of companies

that produce highly processed wood products is smaller compared to those in

the other countries. Finally, the high proportion of the pulp and paper

industry among the Japanese industry sectors distinguishes Japan from the

others countries surveyed (Graph II-4).

There was neither a significant difference nor a tendency across the

five countries with respect to the types of industry sectors that achieved CoC

certification in early years and those obtaining it in later years, after CoC

certification was introduced into the country. In other words, for all countries

except Japan, there is no significant change over time in the distribution of

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

S.

A

fr

ic

a

Br

az

il

Ja

pa

n

US

A

UK

Distribution of CoC Ce

2.6 Discussion

Although FSC CoC certification has been available since 1993 to

forestry-related industries, the actual movement toward CoC certification

among related industries did not become active until 1997. At that point,

interest in CoC certification increased rapidly in the UK and the USA until

2000 and 2001, respectively, as indicated by the increasing number of CoC

certificates issued every year. However, the number of companies certified

every year started to decline in the UK in 2001 and stopped increasing in the

USA in 2002. It is worth noting that the other major international

certification scheme, PEFC, started to issue CoC certifications in 2001.

Neither of these countries is a major player in PEFC CoC certification. In

fact, no American company has achieved PEFC certification yet. While 26

British companies have obtained PEFC CoC as of March, 2004, this is a very

small number considering that it represents less than 2% of the total number

of PEFC CoC holders; further, other major European countries, such as

France and Germany, have substantially more CoC holders, 425 and 378,

respectively. Therefore, the decline in the number of issued CoC certificates

every year in the UK was not because companies chose another available

program over FSC CoC certification. Factors that may have caused this

slowdown include: less pressure from environmental organizations;

public attention on deforestation; fewer benefits from CoC certification than

expected and less demand for CFPs in the wood market.

Although the rate of certified companies per year stopped increasing in

the USA in 2001, the rate at which new companies achieve FSC CoC

certification has been stable since 2000 and every year since then about 100

companies have been added to the FSC CoC regime. This may indicate that,

at least in the USA, interest in CFPs is increasing among the forestry sectors

and supply of and demand for CFPs are expanding. Similarly, Japanese CoC

certification holders are growing at an increasing rate, perhaps

demonstrating increasing interest in forest certification among industries

and demand for CFPs in Japan as well. The numbers of CoC certificates

issued per year in Brazil and South Africa are comparatively lower. The

reasons for this may include the fact that companies in these two countries

have financial and/or technical limitations on achieving CoC certification.

Further, companies operating in the international market are more likely to

be interested in certification considering that the current markets for CFPs

are concentrated in the Northern hemisphere.

The unique distribution of Japanese industry sectors – with a high

that this industry sector has a reputation among Japanese consumers for

clearing tropical forests and is seeking a means to change this image. Also,

Japanese consumers in general are not particularly environmentally

sensitive compared to consumers in other parts of the world such as Europe,

which may result in less perceived need for certification in the other

Chapter III

Profile of Chain-of-Custody Certificate Holders

3.1 Introduction

Because the increasing movement toward FSC CoC certification in

forest-related industry sectors is still a recent trend, number of CoC certified

firms comprise a very small percentage of the total number of forest-related

companies. For example, while the total number of CoC certified firms in the

USA was 419 in 2003, in 1997 there were 36,735 plants for lumber and wood

products manufacturers, 2,095 plants for furniture and fixtures, and 6,496

plants for paper and allied products (the U.S. Census Bureau 2004). As

another example, in Japan there were 9,256 firms for wood and wood

products manufacture, 10,554 for furniture and fixtures, and 7,471 for pulp

and allied products in 2001, while there were 121 CoC certified firms

throughout all the industry sectors in 2003 (the Statistics Bureau of Japan

2004). Therefore, those CoC companies which decided to achieve CoC

certification probably had a specific interest in achieving forest certification,

particular philosophy, market conditions, and social factors.

The concept of environmental marketing appeared in the early 1990s

around the same time that environmental concerns began impacting the

marketplace, particularly in manufacturing industries using natural

resources (Coddington 1993; Polonsky 1995). One of the defining

characteristics of environmental marketing is the use of proactive strategies

that benefit companies and society by redirecting consumer demand to

environmentally preferable products and services (Polonsky 1995).

Companies may adopt environmental marketing for different reasons such as

social responsibility, governmental pressure, competitive pressure and

enhanced profit-making (Polonsky 1994). While concern over the

environment may reduce companies’ operating effectiveness (including cost

performance), it also may provide companies with many opportunities.

Moreover, any firm in today’s competitive marketplace needs to develop

competitive strategies rather than seeking only operating effectiveness.

Fundamental elements of competitive strategies include product

differentiation, selective marketing, and creating a credible company image.

The key element of a product differentiation strategy is to create something

being unique. The principle concept of selective marketing is to target

specifically a group of customers requiring similar products and levels of

service (Sinclair 1992). The core philosophy behind creating a credible

company image is to make consumers view companies’ commitment to the

environment as sincere, so that consumers can trust companies’

environmental claims, which currently tends to be viewed by consumers with

a great deal of skepticism (Hansen 1997). “Green” marketing needs to be

more than just a slogan or an advertising pitch.

Forest management certification and CoC certification are designed to

foster three elements: CFPs are distinguished and differentiated from other

products by being environmentally friendly; environmentally conscious

customers, both individual and industrial, are specifically targeted by

companies as potential consumers of CFPs; and third-party certification,

rather than a company’s own claims about its environmental practices, gives

the company more credibility in the eyes of consumers. In short, CoC

certification is one option for firms in the wood products industry to

implement their environmental marketing strategies. Not all firms adopt

environmental marketing strategies and there may be something particular

about the profiles of firms that have adopted forest certification as their

certification there may be diverse objectives and expectations from forest

certification, as a result of differences in marketing strategies and the needs

of the particular business.

3.2 Research Questions

The research questions for this chapter are the following:

What is the “typical” profile of companies with CoC certification?

Do companies with certain profiles (i.e., their size, sales volume,

type, etc.) adopt forest certification earlier than others?

Do the profiles of the “typical” company seeking CoC

certification differ across countries, reflecting localized social

and cultural factors, and the condition of the markets in which

companies are active?

3.3 Objectives

The objectives of this chapter are to: 1) analyze data on CoC certified

companies in the UK, the USA, and Japan, in order to characterize a

“typical” CoC certification holder in each country; 2) compare the dominant

creating differences in company profiles among the three countries.

3.4 Methods

Among the five countries studied in the previous chapter, three, the

UK, the USA and Japan, were focused on for this research due to the fact

that sufficient data are available on a wide range of companies in these three

countries, from “mom-and-pop” businesses to large-scale firms. Data were

collected on FSC CoC certified companies in December 2003. The data fields

– year of incorporation (this information was only available for UK and

Japanese companies); number of employees; estimated or actual sales in year

2002; the type corporate ownership, e.g., public, private or cooperative; and

number of registered 4-digit Standard Industrial Classification Codes (this

information was only available for UK and American companies) – were

gathered from 11 databases in order to maximize the data coverage on the

CoC holders. The ICC Financial Analysis Reports, the ICC Directory of UK

Companies, the ICC Directory of Irish Companies and the Major Companies

Database are source of collecting data on the UK companies. Reference USA,

US Business Directory, Canada Business Directory and Hoover's Company

Capsules are the sources of data regarding the American companies. Teikoku

AMITA database were employed for collecting data on the Japanese

companies. Information from different databases was reasonably consistent

as determined by comparing data on companies appearing in more than two

databases.

The t-test (α =0.05) was used to test significant differences between

means of data across the countries, where applicable. In order to assess

linear association between data field and the issue year for the CoC

certificate, the correlation coefficient was used.

3.5 Results

3.5.1 Data Availability

There was some limitation on data availability. Out of the 298 British

CoC holders listed in the FSC database in December 2003, at least one of the

11 databases contained data on company type, e.g., public or private, for 257

companies (86.2%); data on number of employees were available for 160

companies, or 54%; data regarding estimated sales of the year 2002 were

available for 147 companies, or, 49%; data showing year of incorporation were

Industrial Codes (SIC) of products were available for 235, or 79%, of the

British companies.

As to the American companies, data on type of company were found for

381 CoC holders (91%); data on number of employees were located for 375

CoC holders, or 90%; data on 2002 estimated sales were found for 365

companies, or 87%; and data regarding 4-digit SIC were available on 377 or

90% of the American CoC holders. However, no database contained

information on the year the American companies were incorporated. Out of

121 CoC Japanese certificate holders, 110, or 91%, were found in a database

containing information on the type of company; 91 companies, or 75%, were

found in databases containing data on number of employees; 85 companies, or

70%, were found in databases of companies sales data; and 87, or 72% of

companies were represented in databases containing the year of

incorporation. Only partial data were found on SIC from Japanese databases,

therefore, this data field was not included for Japan (Table III-1).

Table III-1 Data availability

Country Total

Company on database

Type of

Company Employees

Estimated sales (2002)

Incorporated year SIC

# of Companies 298 257 257 160 147 248 235

% 100 86.2 86.2 53.7 49.3 83.2 78.9

# of Companies 419 381 382 375 365 N/A 377

% 100 90.9 91.2 89.5 87.1 N/A 90.0

# of Companies 121 110 110 91 85 87 N/A

UK

USA

3.5.2 Type of Companies

While the UK and the USA have similar types of companies, there was

a significant difference between Japan and the other two countries. Most

British and American CoC certificate holders are private companies, 83% and

91%, respectively, and there are very few public companies, 3% and 1%

respectively. In contrast, most Japanese companies, 74%, are public, and

only 17% of them are private (Fig. III-1)

247

380

21

10

89

41

11

2

37

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

UK

USA

Japan

N/A

Public

Private

Fig. III-1 Type of companies

3.5.3 Employees and Estimated Sales

The number of employees per company and estimated sales in 2002

were assessed for each of the three countries as indicators of company size.

On average, the Japanese companies have the largest number of employees,

1,048 per firm, followed by the Americans, with 262 employees per firm. The

British average, 185 employees per firm, was the smallest number among the

three countries (Table II-2). With regard to just private firms, the average, or

mean, number of employees for American companies is 88, while the British

private company average, 183 employees per firm, is similar to the average

for public British companies. One large American public corporation, Georgia

Pacific Corporation, greatly increases the average number of employees per

American company, being an outlier. The median number of employees in

American companies (20) is lower than the median of British (85) and

Japanese (176) companies. Another interesting aspect of the data was the

different patterns of distribution of company sizes among the three countries.

For example, most Japanese companies, which employ the highest average

number of employees per firm among the three countries, fall into two broad

categories: 28% of them have more than 1,000 employees and 50% have

20-500 employees. While 97% of American companies have fewer than 20-500

Not surprisingly, the estimated sales data demonstrate trends similar

to those seen by analyzing the number of employees (Fig. III-3). The average

Table III-2 Number of employees (2003)

Country n Mean Min Max sd

UK 160 184.9 1 1,947 277.7 USA 375 262.0 1 75,000 3,871.7 Japan 91 1,048.3 4 9,737 1,904.2

0 5 10 15 20 25 30

1-4 5-9 10-19 20-49 50-100 100-249 250-499 500-1,000

1,000-Number of Employees

% of Companies

UK USA

Japan

Fig. III-2 Number of employees

2002 sales of the Japanese companies ranked the highest (US$5,566 million),

followed by the American companies (US$82 million), and the British

companies (US$39 million). As was seen by examining the effect on the

mean of their numbers of employees, big American corporations are outliers

in the distribution of annual sales of the American companies. If these large

corporations are not included in the analysis, the average annual sales are

about US$25 million for the American companies.

0 10 20 30 40 50

<0.5 0.5-0.9 1-2.4 2.5-4.9 5-9 10-19 20-49 50-99 100-499 500-999 >1000

Estimated Sales (million US$)

% of Companies

Fig. III-3 Estimated sales (million USD)

n=147 (UK), n=365 (USA), and n=85 (Japan)

UK

USA

A statistically significant difference was found between the Japanese

companies and each of the other two countries in terms of number of

employees and annual sales at α =0.05 (Table III-3)

3.5.4 Incorporated Year and SICs

As noted, the year of incorporation of British and Japanese companies

was collected as an element of the company profile. Due to data limitations,

the American companies were not included in the analysis of this variable.

About 50% of the British companies were incorporated during 1980-2000,

while about 50% of Japanese companies were incorporated during 1940-1960.

Over all, Japanese companies are older than British companies (fig. III-4).

Table III-3 Estimated sales (2002, USD)

Country n Mean (US$million) Min Max sd

UK 147 39.0 0.1 533 50.5

USA 365 81.6 0.1 23,271 1,310.9

The number of 4-digit SIC codes was used to generate an index of

product line diversity in the UK and the USA. Due to limited data

availability, the Japanese companies were not considered in this analysis.

The average number of SICs was 1.4 for the British companies and 2.4 for the

American companies. While more than 90% of the British companies have

only one or two SICs, about 65% of American companies have one or two SICs

and the rest of them have more (Table III-4, Fig. III-5).

0 5 10 15 20 25 30 35

2000-1990-1999 1980-1989 1970-1979 1960-1969 1950-1959 1940-1949 1930-1939 1920-1929 1910-1919 1900-1909 1890-1899 1880-1889

Incorporated year

% of Companies

UK

Japan

Fig. III-4. Incorporated year

Although the simple correlation coefficient was calculated to assess the

correlation between variables including issue year, type of companies,

Fig. III-4 Number of SICs

Country n Mean Min Max sd

UK 235 1.4 1 5 0.7

USA 377 2.4 1 12 1.8

Japan N/A N/A N/A N/A N/A

Fig. III-5 Number of SIC

n=235 (UK), and n=379 (USA)

0 10 20 30 40 50 60 70 80

1 2 3 4 5 6 7 8 9 10 11 12

Number of SIC

% of Companies

number of employees, etc., no significant correlation was found between any

variables with one exception: as expected, a correlation was found between

the number of employees and estimated sales. In other words, correlation

coefficients do not indicate any patterns or typologies among companies that

have achieved CoC certificate from FSC so far (Table III-5).

Fig. III-5 Correlation between variables

UK

Variable _companyType of Issue year _employees# of Estimated_sales SIC Incorporated_year

Type of company 1

Issue year 0.04 1

# of employees 0.02 -0.15 1

Estimated sales 0.03 -0.08 0.78 1

SIC -0.01 -0.02 0.15 0.11 1

Incorporated year 0.04 0.05 -0.27 -0.29 -0.15 1

USA

Variable _companyType of Issue year _employees# of Estimated_sales SIC Incorporated_year

Type of company 1

Issue year 0.02 1

# of employees 0.71 0.06 1

Estimated sales 0.71 0.06 1.00 1

SIC 0.13 -0.07 -0.03 -0.03 1

Incorporated year N/A N/A N/A N/A N/A 1

Japan

Variable _companyType of Issue year _employees# of Estimated_sales SIC Incorporated_year

Type of company 1

Issue year 0.35 1

# of employees 0.15 0.01 1

Estimated sales 0.07 -0.16 0.58 1

SIC N/A N/A N/A N/A 1

3.6 Discussion

The most significant finding of this research is that the ‘typical’

companies in each country have distinct national profiles. While the

American and British CoC certificate holders share similarities at certain

levels, the Japanese CoC certificate holders are very different from their

counterparts in the other two countries. The companies seeking FSC CoC

certification in the USA and the UK tend to be smaller, private companies.

On the contrary, in Japan, while many large conglomerates have achieved

FSC CoC certification there is also a significant number of small private

firms with certification. Although firms of different sizes have adopted forest

certification as a tool for implementing their environmental marketing

strategies, their main objectives in doing so may be different, depending on

corporate size. Smaller firms are more likely to use CoC certification to

improve their competitiveness by using certification to achieve product

differentiation and/or to target specific markets. Larger corporations,

however, may value certification as a means of effectively developing

credibility among a wide range of customers.

Interestingly, out of 50 Japanese companies that have over US$100

are public. Unlike Japan, in the USA and the UK, a wide range of industry

sectors are represented among those companies with higher annual sales.

The phenomenon of a large number of multi-million dollar Japanese pulp and

paper corporations seeking forest certification from FSC as a tool for

enhancing their environmental marketing strategies has not been seen

within other industries in any of these three countries.

One of reasons why there are more private and smaller CoC companies

in the UK and the USA compared to Japan may include the fact that there is

higher competition in small businesses in the two countries. However, the

most significant factor resulting in fewer large FSC CoC corporations in the

USA may be the national forest certification scheme, the Sustainable Forest

Initiative, which was developed by forest industry. Most pulp and paper

firms in the USA probably think that SFI certification is compatible with

FSC certification, and avoid FSC CoC certification by signing on with the SFI

program. Moreover, it may be very difficult for large American corporations

to obtain large amounts of certified supply materials at once due to

fragmented forestland ownership in the USA.

On the contrary, many Japanese large CoC corporations with brand names in